Emtec, Inc. Announces 2011 Third Quarter Results

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Emtec, Inc. Announces 2011 Third Quarter Results

Springfield, NJ – Emtec, Inc. (OTCBB: ETEC) (“Emtec” or the “Company”) announced today the results of its third quarter.

Revenue decreased 16% to $44.9 million for quarter ended May 31, 2011 from $53.5 million in quarter ended May 31, 2010, a decrease of $8.6 million. Services and consulting revenue grew by 45%, with approximately half of the growth coming from the addition of revenues generated by the Company’s acquisitions. Gross profit dollars decreased by 3.4% while the gross profit percent improved to 17.4%. Earnings before interest, taxes, depreciation and amortization expenses (“EBITDA”) was ($313,000) for the quarter ended May 31st, 2011 compared with $676,000 for the quarter ended May 31st, 2010. Adjusted EBITDA, which is defined by management as net income before interest, taxes, depreciation, amortization, retention bonuses, stock-based compensation, executive recruiting fees, severance, discretionary bonuses and stock warrant expense (“Adjusted EBITDA”), was ($36,000) for the quarter ended May 31st, 2011 versus $1.2 million for the quarter ended May 31st, 2010. A reconciliation of EBITDA and Adjusted EBITDA to net income (loss) is attached to this press release.

EBITDA and Adjusted EBITDA are key financial metrics used by the Company’s Board of Directors and management to evaluate and measure the Company’s operating performance. These metrics are not in conformity with generally accepted accounting principles (“GAAP”) in the United States of America. Management’s calculation of EBITDA eliminates the effect of charges primarily associated with financing decisions, tax regulations and capital investments. Adjusted EBITDA also eliminates certain unusual costs and reflects certain changes in the business made by management and includes adjustments which in the opinion of management are necessary to reflect the underlying ongoing operations of the business. Net income (loss) is the most comparable GAAP measure of the Company’s operating results presented in the Company’s consolidated financial statements. We have made a reconciliation of net income (loss), the most closely comparable GAAP measure, to these non-GAAP measures for the quarters ended May 31st, 2011 and 2010 and discussed these adjustments in this release. EBITDA and Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other GAAP measure of performance or liquidity, and may not be comparable to other similarly titled measures of other companies. Management believes that the presentation of EBITDA and Adjusted EBITDA is important to investors because Adjusted EBITDA is used by management to evaluate financial performance and continuing operations and to determine resource allocation for each of our business segments.

“We continue to make a transition to a recurring revenue base and are seizing every additional service opportunity to grow our bottom line. Typically we start to see Government procurement sales increase in the third quarter, but this did not materialize this year. The services growth was not enough to offset a $1.7 million decrease in gross profit in procurement services and the increased investment we made to support our services growth. We believe many of our Federal clients were holding back on orders due to the budget concerns and the debt ceiling.” said Dinesh Desai, Chairman, CEO, and President of Emtec. “We have seen some signs of the Federal purchasing returning, but it has not been rebounding quickly. We took steps during the quarter to reduce our costs permanently and right size many of our business units. We believe these steps combined with our services growth will provide for more stability in our profits in the future. Additionally, we are continuing to invest in our platform for services growth.”

ABOUT EMTEC

Emtec is an IT consultancy dedicated to helping world class organizations in the enterprise, education, and government markets drive transformation and growth by employing the latest enterprise technologies and innovative business processes. We empower our clients to accelerate innovation and deliver amazing client experiences to better compete and ultimately lead in their industry. Our “Client for Life” approach is built upon over 20 years of delivering rapid, meaningful and lasting business value. Our offerings span the IT spectrum from Advisory, Applications (Enterprise, Custom, Mobile and Cloud) as well as a suite of Analytic and Infrastructure Services. www.emtecinc.com